SEB Merchant Banking may develop a multi-strategy hedge fund platform that would provide a flexible and cheaper alternative to funds of funds. Investors would be able to invest directly in participating hedge funds without any additional fees.

The firm is seeking to grow its trade execution and prime brokerage business and the platform would help it engage with more hedge fund managers, said Seppo Leskinen, head of global hedge fund services in London. The firm kicked off a managed account platform focused on pure currency managers in November, but this might turn out to be the first phase of the broader platform, said Leskinen. SEB will expand into other strategies providing it can see benefits for both manager and investor, added Andrew Woolmer, who was responsible for developing the currency platform. Discussions are in the very early stages, he stressed.

SEB began with currency hedge funds because it perceived an increased interest in the strategy among investors and "because I'm an FX man," said Leskinen. A timeframe has not been set for rolling out a broader platform. The merchant bank has not decided which strategies to develop next, although equity, fixed-income and futures strategies are likely candidates, he stated.

Lyxor Asset Management,HFR Asset Management and PlusFunds Group already offer direct investment in the underlying hedge funds on their platforms. Lyxor charges an 85 basis point fee; officials at HFR and PlusFunds did not respond to inquiries. Some investors are becoming jaded about funds of funds because of the extra fees they charge (iialternatives.com, 4/22).

SEB does not charge investors for access to the currency hedge fund platform; it was created as a way to develop relationships with managers who might use the bank's services, explained Leskinen. "The driving force was to extend our push into hedge funds," he stated. As the platform broadens, investors will be able to select managers across a wide range of strategies, effectively creating a tailor-made, cost-effective fund of funds, he said. Investors will be responsible for negotiating fees with managers.